Key facts
- Global financial firms are increasingly focusing expansion plans on South Korea, according to a survey by ASIFMA and KPMG.
- Interest in expanding into South Korea has jumped to 50% of respondents from 21% a year ago.
- Firms are adopting a more cautious approach to China and India due to regulatory and geopolitical concerns.
- Singapore, Hong Kong, South Korea, China, Japan, India, and Taiwan are the primary destinations for expansion interest.
- Two-thirds of surveyed firms plan to grow their Asia-Pacific business in the next three years.
Global financial firms are shifting their expansion strategies, with a notable pivot towards South Korea while adopting a more cautious stance on China and India, according to a joint survey by the Asia Securities Industry & Financial Markets Association (ASIFMA) and consultancy firm KPMG.
Out of 34 participating firms, approximately two-thirds intend to grow their Asia-Pacific operations over the next three years. Singapore, Hong Kong, South Korea, China, Japan, India, and Taiwan are collectively attracting about half of this expansion interest. ASIFMA Chief Executive Peter Stein observed that competition within Asia has intensified, with more countries now vying for global capital flows, unlike five years ago when China was the dominant destination.
Singapore's consistent appeal is attributed to its neutral geopolitical stance, not being tied to any single major power or bloc. South Korea, historically undervalued, is now experiencing extremely positive sentiment across various sectors, including equities and bonds, bolstered by government plans for World Government Bond Index (WGBI) inclusion.
However, Asia's two largest markets, China and India, are drawing a more measured approach. Concerns in China revolve around geopolitical tensions and regulatory frameworks, while India faces challenges primarily from local regulations and operational difficulties. Despite India's improved ease-of-doing-business rankings, firms find its regulatory environment increasingly challenging, leading to cooled expansion appetite compared to previous periods. Persistent issues with know-your-customer standards and non-deliverable forwards restrictions remain. In China, expansion interest has stabilized around 40%, down from earlier peaks, as firms assess capital controls, data regulations, and geopolitical risks, leading to reduced long-term exposure certainty.